Capital gain on the transfer of land used for agricultural purposes is not to be charged in certain cases

When a capital gain results from the sale of property that was utilised for agricultural purposes by the assessee, who is either an individual, his parent, or a Hindu undivided family, during the two years before to the date on which the transfer occurred, and the taxpayer has acquired any additional land for agricultural use within two years of that date, then, rather than the capital gain being charged to revenue as income of the prior year in which the transfer took place, it shall be treated in pursuance of the following provisions of this section, specifically:-

  (a) The difference between the quantity of the capital gain and the cost of the land thus obtained (hereafter referred to as the new asset) must be charged under Section 45 as the income of the prior year if the amount of the capital gain is larger than the cost of the new asset;

  (b) The cost of the new asset must be reduced by the amount of the capital gain in order to account for any capital gains that result from transfers made within three years of purchase if the amount of the capital gain is equivalent to or less than the cost of the new asset. In this case, section 45 will not apply to the capital gain. There is a lot to know about 80gga.

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The quantity of the capital gain that the assessee does not use to buy the new asset before the date of filing the return of income under section 139 must be transferred by him before filing the return in an account at any bank or institution that may be specified in and used in accordance with, any scheme that the Central Government may frame in this regard by notification in the Official Gazette.

The amount, if any, previously used by the taxpayer for the acquisition of the new asset along with the amount so deposited shall be assumed to represent the cost of the new asset for the purposes of the aforementioned sub-section, and such return should be accompanied by proof of such deposit.

When the time period mentioned in the preceding sub-section has passed and the cash deposited according to this sub-section has not been used whole or in part for the acquisition of the new asset, then,

 (a) if the two-year window from the transfer date of the original asset ends without being used, the amount not so used must be charged under Section 45 as income of the preceding year; and

 (b) according to the aforementioned plan, the taxpayer shall be permitted to withdraw such sum.

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